Re: Turbo questions

"Wayne Niddery [TeamB]" wrote:
I.P. Nichols wrote:

I've not seen elasticity distinguished as two different terms in a
manner that leads to opposite conclusions. When I studied the theory
of price, the term elasticity referred to the "price elasticity of
demand" which is measured as the percentage change in quantity
demanded that occurs in response to a percentage change in price. In
my mind I always picture it as the slope (dQ/dP) of the demand curve
measured at the point in question.

I don't have a reference handy, but I've seen written that elasticity of
price means, essentially, inelasticity of demand, IOW, within a more than
typical range, the price can vary without significantly effecting demand -
in both directions, lower price won't increase demand, higher won't
decrease it. There's still limits though (at the high end), typically at a
point where some substitute becomes feasible.

The example you give is for a classically inelastic market like gasoline
where even if the price is significantly increased the demand doesn't
precipitously drop over the short run since much of the driving we do is
considered essential and we will spend less at Wal-Mart so we have enough
money for gasoline. This is just the opposite of what is described in the
article I quoted where a relatively small increase in price causes a large
decrease in demand which is classically described as an elastic market and
that's why he said "...these customers pricing behavior was closer to being
perfectly elastic". If you don't want to accept this terminology then I give
up. ;-)



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